Netskope shares surged more than 10% in premarket trading Wednesday after the cloud and AI security vendor delivered fiscal second-quarter results that beat Wall Street forecasts and raised its full-year outlook, powered by accelerating demand for tools that protect artificial intelligence systems.
The Santa Clara, California-based company posted revenue of $221 million for the period, up 29% from $170.8 million a year earlier and ahead of the $214.2 million analysts had projected. Its adjusted loss narrowed to $0.03 per share, compared with the $0.07 per share loss Wall Street expected.
Annual recurring revenue climbed 27% to $899 million, while remaining performance obligations jumped 36% to $1.35 billion. Gross margin expanded to 77% from 75% a year earlier. Adjusted operating margin improved by 11 percentage points year over year to negative 9%, also ahead of guidance.
CEO Sanjay Beri attributed the performance to “continued differentiating organic innovation” and sustained demand for the Netskope One platform across security, networking, analytics and AI. The company raised its fiscal 2027 revenue forecast to a range of $888 million to $892 million, with the midpoint above the $881 million analysts had estimated.
For the current quarter, Netskope projected revenue of $227 million to $229 million, representing approximately 24% growth, with an operating margin of about negative 8% and a net loss per share of $0.03 to $0.04.
AI Security Pipeline Gains Traction
AI products are emerging as a central pillar of the company’s strategy. Netskope said offerings including AI Guardrails, AI Gateway, AI Command Center and Agentic Broker are drawing growing customer interest, with roughly one-third of its AI security pipeline already in or entering proof-of-concept stages.
“Security, IT, and infrastructure leaders don’t want to say no to using AI,” Beri said. “They want to say yes to it, but do so safely.”
The chief executive noted that many enterprises still lack visibility into which AI tools and agents are being used inside their organizations. He said Agentic Broker provides oversight of agentic and model-context-protocol traffic, while AI Guardrails inspects prompts and responses for threats such as prompt injection, jailbreaking and policy violations.
Management also highlighted transaction-based pricing for AI products and outcome-based pricing for some security offerings. Beri told analysts that enterprise buyers typically follow a six- to 12-month validation and procurement process, suggesting a larger revenue contribution from the AI pipeline could materialize later in the fiscal year.
“We see that pipeline building, we see the POCs building, then as a result, we see the ARR building,” he said.
Platform Expansion and Customer Momentum
Netskope, valued at about $5.7 billion, is positioning itself as a comprehensive platform rather than a single-point solution, putting it more directly in competition with larger cybersecurity vendors including CrowdStrike and Palo Alto Networks. Both rivals recently reported robust growth, underscoring resilient enterprise demand as companies race to deploy AI while securing increasingly complex digital infrastructure.
Platform adoption continued to climb. The number of customers generating more than $100,000 in ARR rose 23% to 1,686, representing 87% of total ARR. At quarter-end, 59% of customers used four or more Netskope One products, up from 51% a year earlier, while 41% used five or more, compared with 35%.
Net retention rate increased to 114%, and gross retention reached another all-time high, according to CFO Drew Del Matto. Revenue growth by region was strongest in EMEA at 37%, followed by Asia-Pacific and Japan at 31% and the Americas at 25%.
Del Matto said the operating margin improvement reflected leverage across the business as revenue expanded, with research and development expense improving by approximately eight percentage points as a percentage of revenue. Sales and marketing expense was roughly flat as a percentage of revenue while the company continued to ramp sales representatives.
Netskope also reduced approximately 5% of its workforce during the quarter while reallocating spending toward AI infrastructure and tokens in research and development and general and administrative functions. The company ended the period with $1.1 billion in cash equivalents and marketable securities. Free cash flow was negative $29.8 million, slightly ahead of internal expectations.
Broader Ecosystem and Infrastructure Moves
The company cited expanded ecosystem efforts during the quarter, including participation in NVIDIA’s Open Secure AI Alliance, CrowdStrike’s Project Quiltworks, and integrations with Anthropic’s Claude Enterprise and Amazon Bedrock AgentCore. It also launched its Netskope Catalyst Managed Service Provider program.
On the infrastructure side, Netskope said its NewEdge private cloud network, which spans more than 120 data centers, is designed to support AI-related traffic while allowing customers to establish geographic policies for data processing. Its AI Fast Path technology reduced latency by as much as 90% in real-world testing on the network.
The company also integrated NIST-approved post-quantum cryptography algorithms across its SASE platform and global data-center footprint. Beri said the capability enables customers to use quantum-resilient encryption for internet communications and will help address regulatory requirements as quantum computing develops.
In the federal market, Beri described the business as small but important and growing, noting that Netskope is FedRAMP High certified and has been building its U.S. federal sales organization.
The company is also moving customers to annual billing, a transition that is proceeding faster than expected and is projected to be completed by the middle of the next fiscal year. While the shift temporarily defers cash collections, Del Matto said it improves visibility into future cash flows and customer commitments.
Retail sentiment on Stocktwits shifted to “extremely bullish” from “bullish” following the report, though some traders expressed caution about a potential pullback in the stock on Thursday.
Click Here For The Original Source.
